Archive for the ‘Marketing’ Category

The Seller HAS a Problem and Then BECOMES One

Thursday, December 18th, 2008

Marketing

The seller has a problem.  They have a house they want to sell and need to sell it at a certain price.  They hire an agent who takes on the task of selling the home.

"Maybe if you had more open houses?"

"Have you thought about running an ad in the Wall Street Journal?"

"There are a lot of people from California with money because the prices are so high there.  Run an ad in the L.A. Times."

"If you go to (large local employer) you can put a notice on their bulletin board about the house."

This is just a partial list.  The limits of the list are only the limits of the seller’s imagination.  There are hundreds and hundreds of these great ideas for getting the house sold.  Sometimes agents try them all (one at a time, of course).    Usually, the agent notices that it didn’t work.  But for some strange reason this does not prevent the agent from attempting the very same science fair project again at a later time, and surprise: they get the exact same results they did the first time.

Walking through the office about 15 years ago a very nice agent asked me if I would go in with her on running an ad in one of the picture magazines.  She didn’t want to buy the whole page herself and was looking for a couple of other agents to put one of their houses in the ad, in order to defray the cost of the ad.  I asked her why she was running the ad and her answer was, "To make the seller happy".  I asked her if she believed that running an ad in the picture magazine was very likely to sell the house.  Her answer was no, she did not think it would even help sell the house.  I told her I did not ever run ads on homes because they did not make any difference in getting the home sold.  She agreed with me.  But she still ran the ad.

It was easier for her to run that ad than it was to tell her seller the truth.  My answer to sellers on that issue is, "If an ad in the paper or some magazine was going to sell their home they don’t need an agent.  They could just run the ad themselves and save the commission."  That’s the truth.

From Anne:

ok, so if I may start my question asking. My goal is to get seller’s to stop getting so addicted to my marketing efforts and more focused on price. I feel my current listing presentation does a pretty good job (although now after star power I’m going to make it even better) as some are well trained while others act like cocaine addicts and can’t get enough of my open houses and are always calling me with new ideas to get "exposure" to their potential buyer and crap like that. Some of them I flat out tell them no and others I feel so sorry for because they are seriously in trouble if they can’t sell financially. How do I handle this? any thoughts?

Yes.  Get a subjective reality on what does and does not cause houses to sell.  Get rid of all of the little points of "reasonableness" on this subject.  The "unsolvable problem" does not exist in the mind of the seller.  I do understand that it seems like it does.  It exists in your mind.  You do not have certainty that what you are doing is enough.  There is some nagging doubt that there is "something" you aren’t doing that you "ought to do".  This point alone opens the door to all sorts of nonsense (the not very fun kind of nonsense).

If you believed that running those ads or holding those open houses (or whatever "exposure" you or they could dream up) was going to cause the house to sell, you would be doing them.  You wouldn’t need any sales pitch or prodding.  You would just do them.  There are two factors here: what works for you and what you "like" to do.  Open houses can work.  I don’t like them.  Therefore I don’t do them.  This is not a statement that others should not do them or that someone who does not know how to correctly hold a house open should not learn how to do it. 

I believe that if you re-read the first paragraph after your question and wanted a simple answer to what caused a home to sell (assuming the usual is already being done) you will come to realize what you already know: price.

Predicting the Future of Residential Real Estate Brokerage

Tuesday, December 16th, 2008

100%

Okay, so they’re not really all "100%".  Re/Max is now a maximum of a 95% split.  Further, most of the 100% companies have various other more traditional splits (IE: 70 – 30) for those who can’t pay the standard monthly bill.  But the overall trend for the industry is that most "mega agents" wind up at a 100% company and many of the major marque agents wind up eventually even leaving Re/Max to start their own company.  Re/Max was, at one time, the most agent-centric company in the business.  That has changed a bit.  Now at their national conventions the only "approved" business coach is Brian Buffini.  The others, who used to be quite visible ( Mike Ferry, Howard Brinton, to name a few) at those conventions are no longer welcome.  Only Buffini.  I am just guessing that someone named Brian Buffini pays a specific amount of what he can collect from Re/Max agents to Re/Max International.  That one is just a guess, but there was no guess work involved when Re/Max sued First American last April.  First American backed out of the deal and stopped payments.  The lawsuit from Re/Max prompted a probe from the Colorado Real Estate Department looking into the possibility of a HUD kickback violation

Actually, I don’t think they did actually violate the law.  But I have to say I loved their defense:  we were basically just selling a mailing list.  We have a lot of agents, let’s pimp them out.  This is from the company that revolutionized the residential brokerage business.  Not very revolutionary, is it?

___

The 100% concept was started by a very remarkable man named Dale Rector.  He was a true visionary and he was the founder of Realty Executives.  He made Realty Executives into a very successful company that for many years was the top selling company in all of Arizona.  Prior to Re/Max, Dave Liniger worked for Dale Rector here in Phoenix and had been sent by Dale up to Denver to start a Realty Executives office there.  Instead, Dave started Re/Max.  A few years later he took it national.  He successfully accomplished what Realty Executives never did: massive expansion on a global level.  The real estate world would never be the same.  Agents who could produce did not have to "give the broker half".  They would pay the broker to be there (a desk fee) and pay their own expenses and keep all of what they earned.  Dale Rector’s original dream had become a reality for agents all across the nation and eventually, most of the world.  But it was Dave Liniger who made that dream a reality.

__

Anytime anyone discovers or develops anything that could be a meaningful advantage in business it does not take long until someone else comes along with a knock off version, usually for less money.  Real estate brokerage offices are no exception.  By the mid 70’s, when Re/Max was just getting going and Realty Executives was going strong a different kind of company started sprouting up all around the Phoenix area.  Realty Executives / Re/Max knock offs.  There were dozens and dozens of them.  Some were very well run, others were very poorly managed and went out of business.  The company I have been with for 31 years, John Hall & Associates was one of those "original knock offs".  Less offered and less service to the agent but at a much lower price.  In the early 80’s came the knock off – knock offs.  West USA, was started by Clay Fouts.  Clay started at John Hall about the same time I did, in 1978.  He liked the idea of what John had done and saw that he could provide similar services for less.  Clay’s original value proposition was simply having a lower price per month for agents than John Hall.  When he started West USA he got several hundred of his original agents from John Hall.  He took some from Realty Executives too.  Eventually came the knock off of the knock off of the knock offs.  Companies that would charge the agents $25 – $50 a month to hang their license and take a few hundred dollars out of each closing.  These companies went on to pass West USA (West USA was the largest company in Arizona with about 2,000 agents) and there is now a company with well over 3,000 agents: HomeSmart.  This business model is scalable and can be started just about anywhere.

If HomeSmart doesn’t eventually open an office in your city don’t worry.  Someone like them or someone lifting their business model will eventually do just that.  How can a brokerage firm make any money at $25 – $50 a month?  Use your calculator to multiply that times, say 3,000.  Add in the fact that they are not providing office space, a desk, phones, etc. and you can start to get the picture.  Maybe they only have 200 – 300 agents they are collecting $200 a closing from and they are still quite profitable.

The competitive pressure these companies have put on "traditional brokers" with regard to commission splits has changed the landscape for all real estate companies here.  For example – a little known fact – the two largest national 100% companies, Re/Max and Keller Williams charge agents considerably less in the Phoenix area than they charge elsewhere.  For example a Re/Max agent here could pay around $600 a month without office space.  That same set up in the San Francisco area would be about $1,600 a month.  Watch that price drop once the knock off knock off knock offs are well known to the agents there.

The customers of the big brokers are not buyers and sellers.  Buyers and sellers are the customers of the agents.  The customer of the big broker is the agent.  The brokers are in the agent acquisition and retention business.  If successful, their expertise typically is limited and is solely in getting and keeping agents and avoiding lawsuits.  They seldom even know much about the little detail of getting and keeping buyers and sellers – as they never did it very much.  The skills required to be a successful agent and the skills required to be a successful broker are not the same skill set.  There are a select few who have both skill sets but that is quite rare from what I’ve seen.

There are specific communities and areas where a company is so good at getting business that they can hire all the agents they want and dictate the commission splits.  However, this is not the pattern in most areas.  The pattern is typically that the company doing the most business has the most top producing agents.  If those top producing agents left to go somewhere else their business would go right with them.  So what is a brokerage company not making enough money to do?  There are just a few choices: 1. cut back expenses, 2. close, 3. find a way to drive in business or 4. find a way to get more agents.

As almost all of the companies are completely inept at driving in business they are forced to choose options 1, 2 or 4.  Option 4 is achieved by having a company agents would really like to affiliate with – so to survive they have to be really really great or really really inexpensive.  The later is typically much easier to achieve.

Will Real Estate Ever Have a 900 Pound Gorilla?

Friday, December 12th, 2008

Big Ape Realty

Some fantastic viewpoints lately about the future of the residential real estate business.  A few see our business becoming more "agent-centric".  Others see it becoming almost exclusively "broker-centric": the big broker brands will dominate by being consumer-centric. 

Really?  What big brand?  Is there even ONE big brand that has a name (a brand?) that means anything to anybody?  The only national "big brands" that the agent public or the general public even thinks of as representing much of anything is either a discount company or a "100% company".  What one company is the most well known, most well thought of (by agents and the public)?  That would be Re/Max, a 100%, agent centric company.  What other company is going to pass them by?  If anyone can and ever does, it will be Keller Williams, an even more agent centric 100%company.  In a buyer’s market, there is no discount real estate company that is ever going to dominate any city or area, let alone, the country.

Take what is currently, factually, the really biggest real estate company in the world, Realogy: other than Sotheby’s what brand do they have that matters?  Try none for an answer.  What meaningful difference does the general public or even the agent public see between Century 21, ERA, Better Homes & Gardens, or Coldwell Banker (just to name a few)?  Which one of those is a "good brand"?  (yes, yes, I know, Coldwell Banker is supposed to be their "premier brand")

Is Coldwell Banker a better brokerage firm to the public than Century 21?  Do people across the nation think to themselves, "It would be so great if we could buy our next home from a Coldwell Banker agent"?  Ever?  Does anyone, anywhere, ever think that?  How about, ERA?  Does anyone say,"I only want to do business with an ERA agent"?  If not, what are those "brands" worth?  Not much.  Why?  They don’t stand for anything.  To matter, a brand must mean something in the mind of the public and few national real estate firms have ever done that and then managed to hold on to their position.  Century 21 did it years ago, they were the number 1 company in the world.  Re/Max passed them and started claiming number 1 in their ads too.  They even went to court to get C21 to stop making the "We’re number 1" claim.  Re/Max won.  They kept their position by attracting more and more agents with their name (which does mean something to the agent public and the general public).  In terms of brands (which is what it would take for a company to "own" a market – have a brand that was perceived as desirable by the public) Re/Max probably has the "best brand" in the United States.  I don’t know of any cities or states where they "own the market".  Why not?  Being "Number 1" isn’t enough.  The buyers and sellers will still choose to do business with that incompetent relative who just entered the business.  Over the years, those agents (they’re in, now they are out) – on the average – will sell three houses before they leave the business.  That is three sales I didn’t get.  You didn’t either and it isn’t going to matter much what scripts you use.  Their "brand" of I-know-you must be senior to someone being number 1.  Or any other number.

What is the difference between ERA and Better Homes and Gardens?  Other then the logos and phone numbers, is there any meaningful difference that anyone would ever really care about?  By the way, this is the very same problem that General Motors achieved for themselves with their brands (why yes, as a matter of fact, they have also run their big company into the ground and are currently broke).  What is the real difference between a Buick, a Chevy, an Oldsmobile and a Cadillac?  Not much, it seems.  You can buy cheap Cadillacs, an expensive Chevy, an Olds that costs more than a Cadillac.  All mixed up.  All standing for nothing.  The only brand General Motors has where they name actually means anything is Corvette.  Corvette actually stands for something and is a "valuable brand".  The others, not so much.  You can also see this nonsense at work from the executives at Volvo: Volvo = safe.  So, brand-wise it is beyond stupid for them to have a convertible or a "sports model" Volvo.  Currently, Volvo is trying to change Volvo = safe to Volvo = life.  It is a stupid strategy and will fail.  If they continue in that direction they will crap on their brands the way General Motors has crapped on theirs.

If we shift the discussion to a local one vs. a national one it can change completely.  Are there companies that dominate their local markets?  Or a segment of that market?  Absolutely.  But it is accomplished by representing something.  Something that is wanted and needed currently by that public in that area.  The same thing is true for an individual agent.

In some of the posts on various blogs and also on Inman there has been discussion of IDX vs. VOW and how perhaps a national MLS is needed and that some fantastic company using really wonderful technology is going to attract loads and loads of business, pay the agents less and sort of take over.  I contend that if such a thing were possible it would have already happened.  Zip or Redfin would be making a ton of money (instead of endlessly feeding their companies with investor capital that is not likely to ever come back to them).  I don’t think it makes any difference to any big company if only IDX or only VOW is used.  About the only people who it will ever make a significant difference to are those agents (not "companies") who primarily work buyers.  They use other people’s listings (via IDX or VOW) as bait to attract buyers who aren’t working with any agent yet.

Desk-fee agents are not only not going away, they ARE the future of our industry.  Don’t believe it?  Look at the actual trends for the past decade.  Our industry is shifting from a totally broker-centric model to 100% companies.  Right now, in most parts of the country it is the big national 100% companies who dominate (in terms of numbers of agents).  Take a closer look at where 100% started (Phoenix) and you see a very different picture: most of the agents are with 100% companies and the "traditional" companies have changed their splits to the point that they may as well be 100% companies.  But it is the less well-known 100% companies that have the largest number of agents.  Hint: they charge less.  A lot less.  My prediction is that these companies and teams of agents (with a rainmaker, mentor) are the future of our business.  We will have fewer agents and I believe that is a good thing.  A very good thing.

Thanks to Michael Wurzer for his post which got me to write this one!  And to Al Ries for helping me to actually learn what branding really is.

Fox News – My 1st Time on a National Show

Saturday, November 1st, 2008

Russell is Interviewed by Kent Dana

Sunday, October 19th, 2008

Kent Dana 1 on 1

Listings. Listings. Listings. Still.

Tuesday, September 23rd, 2008

Wit & Wisdom

From the Department of Homeland Stupidity comes the newly formed Department of Bailouts.  Is there now a sufficient level of converting the United States into a socialist economy for the New Regime President (aka, Treasury Secretary Paulson) to feel that his work is done?

But the above isn’t my special area of expertise.  Showing fellow agents how to have a truly successful business is what I am known for.  And I find it funny (odd?) when I read something that directly contradicts what I know to be true on that particular subject.  It certainly isn’t the first time I’ve seen, "getting listings is no longer the best way to go" – just the first time I’ve seen it from someone I respect as much as I respect Brian Brady.  He wrote:

Thirty years ago, the mantra “listers last” was all important advice to a new real estate agent.  Today, inventory has been democratized through the IDX search on a website.   Open houses then, are a good time to work on your SEO.  A REALTOR who controls the SERPS rather than the inventory should profit best from this buyer-centric market.

Okay, fine.  But can anyone name even four or five TOP AGENTS who have buyer based businesses?  I personally know a couple of them.  But I don’t know of any top agent who has had a buyer based (as opposed to a listings based) business who did it for 3 – 4 consecutive years.  Can an agent attract buyers via the internet?  Absolutely.  Can it be done at a level so great that the lead agent (rainmaker) hires many many many buyer agents to handle the load?  Again, the answer is a confirmed yes.  However, the web traffic – at that level – isn’t normally achieved through SEO but pay per click.  All of the huge buyer based operations I know of in the U.S. use PPC to attract the traffic.  Not saying SEO doesn’t enter into it but the bulk of it is PPC.

How many of them have done it or will be able to maintain their performance level for even three years?  I can’t say, as it (at least to my knowledge) hasn’t ever been done for that long.  Which is my main point.  Almost all top agents have a listings based business.  I am not saying this because I have a listings based business, I am saying it because that is what I found when I went looking at the profiles and the patterns of top agents.  What I observed is what caused me to decide to take the path I took – become a lister.  I have never seen any confirmed data (vs opinions)that contradicts that.

There is nothing I am writing here that suggests that selling homes to buyers (as we need at least one for every listing!) is bad or should not be done.  Oddly, by accident, I am one of the leading buyer side agents (based on number of sales) in the Phoenix market.  I discovered that odd fact a little over a year ago.  I had been working for years to find out what the "top buyer agents" were doing so I could start doing it too.  Once I realized that I wasn’t way behind everyone else but ahead of most everyone I stopped trying to "discover" what I must already know.  Our buyer sides came about as a result of marketing our listings.  Period.  Just doing the things that should be done to properly market a listing produced buyer deals.  Lots of them.

An interesting post I came across about a month ago was over at the always-worth-reading, Notorious R.O.B.  There was a discussion regarding possible violation of a listing agent’s fiduciary duty to have their listings on Zillow, Trulia, etc.  Seems several different lawyers were of the opinion that it could possibly violate a listing agent’s duty to his seller.  I disagree.  Completely.  From my comments to that post on Rob Hahn’s site:

There will always be plaintiffs and lawyers litigating for various reasons. I can not say any lawsuit over which websites a listing was posted on should not occur. I can say that any lawsuit brought for those reasons is without merit. It would have be based on the (erroneous) premise that inquiries from those various sites actually directly helped or caused a home to sell.

The top national site for traffic is Realtor.com. I currently pay about $4,000 a year to “enhance” my listings. There was a time that every 20 leads from Realtor.com equaled a closed escrow on *a* home. Seldom the one they inquired about. Now, the *only* reason I am on Realtor.com is to be able to say to our sellers that “we feature your home on Realtor.com”. That is the ONLY reason. In the past four years, I have never sold a listing because it was on Realtor.com, Trulia, Zillow or any of the other sites. I have sold homes to buyers because we received an email lead because we have a lot of listings on those sites. Big difference.

If you are wanting buyer leads those sites may or may not be good. If you want to “impress” your sellers, they can be very good. If you want to actually sell that house I don’t see that they make *any* difference.

All of my listings are on all of the important sites.  We do receive some inquiries from nearly all of them and some of those inquiries can become actual leads where we make a sale.  I’m not convinced that today’s "internet lead" is much different than the "ad call" of twenty-five years ago.  The best data I had at the time was it took about 400 calls (on the average) regarding a particular home to physically sell that home to that buyer.  If you only have a few listings and sometimes sell one it can seem like it does not take that many.  Get a few thousand and keep track of them and you see a different picture.  If this were not true I suspect that most of us would be out of a job – as most sellers could just run an ad (or today, get "internet leads") and sell their own home.

My main points in this post are:

1. Listings were, are and will continue to be the very best method of having a stable real estate practice.

2. There are huge amounts of fantastic nonsense available from lots of different places regarding what is necessary to sell homes.

3.  People who can’t see clearly will continue to disagree with point # 1 and therefore continue to attempt to sell the nonsense mentioned in point # 2 as essential.

Nonsense.

The iRuss – a Look From the Other Side

Thursday, June 12th, 2008

iRuss - the other side

This post is in response to my last one.  I had no idea it would be so well received.   Having surveyed only myself, to me it was a post I tossed off.  This post consists of the responses to the questions and points raised.

I want an iRuss also! A mini iPod crammed full of Russell Shaw podcasts and videos… You know, there could be some $$ that idea…

Go to this page and load yours up.  Scroll down to the lower half for the audio and video content.

sometimes as we are at the appointment, we learn about things that cause us to NOT take the listing. Honestly, it is more us not TAKING it than us not GETTING it. My business plan does not allow me to take a listing that is overpriced or in a condition (physically/financially/emotionally … ) where I do not think that I can do the BEST by my seller clients.

I believe the information here is the most important, most vital, high impact information there is for stable success.  Here is one of the sample emails I send out every month to invite agents in the Phoenix area to one of the talks that I give every month.  There are four different talks that I give and at the end of the 4th month I start over with talk number one.  Since April of last year I have given one of these talks to over 1,200 agents, at about 15 agents at a time (that is a lot of talks:-)

1. Did you discover new reasons to turn down a new listing?

2. Was there an area harboring more than their share of unsold listings?

3. Was there a pattern showing numbers of bedrooms/bathrooms (or other physical attributes or lack thereof) being shunned by buyers?

4. Was there a particular (and discernible) seller mindset hindering the sales process?

5. Was there an area/neighborhood which was, for some reason, consistently listed over market value?

We don’t have new reasons to turn down a listing.  We have the same reasons we have always had: bad seller or a bad price.  If the seller exhibits a majority of  the 12 characteristics covered here I don’t want their business at any price.  Even if a “nice” person, it is necessary for them to price the house at or below the water line.  Once we can see we are fishing with our bait out of water we must get the price lower.  Sellers who can’t or won’t reduce have a listing that isn’t going to sell.  Therefore, they cancel or we do.  There is always some price point at which it would sell, in any market.  If they are really serious, we can and will find that point.

I often hear remarks from agents like, “the bank sold that house really cheap – 30% below market value”.  I don’t agree with that kind of statement.  If various banks are the only sellers selling in an area and they are selling all of their houses at a perceived “below market” sales price – perhaps that IS the market for that product in that area.  A good price fixes any of the various bad conditions.  There is no good reason to take (or keep) a listing that isn’t going to sell.

Speaking of keeping records, what does a Millionaire Real Estate Agent use to do just that?

We use Agent Office for our transactions, ACT for all of our names and addresses, etc., and Excel to keep the production numbers. 

Pricing is a crap shoot and we don’t get the list price until it hits the market and that’s well into the process. Sometimes they’re priced well right off the bat, sometimes they’re not. If they don’t sell, the bank keeps lowering the prices until they do, so that’s not such a big deal.

Correct, pricing IS a crap shoot.  This is true in both a rising and in a declining market.  In a stable or slowly rising market (like we used to have before 2005 when we could use “comps”) we all pretty much knew how to price a property.  Now we really are guessing.  Sometimes pretty good guessing and it seems currently to be as much an art as a science.  That will only be true until the market stabilizes and then it will only be the super high end and unique homes that it will still be an art to correctly price.  Now it is most homes in our area.

And from this jewel, this:

Whatever it is, people are on edge. Have you noticed?

Yes, I have.  Many people in our industry have been very very stressed.  Everyone has stress points. Everyone.   No matter how easily any given person confronts and handles situations that make others marvel at their ability, that person has something they don’t easily confront.  That thing or situation is then capable of causing them stress. They are transmitting those feelings to pretty much everyone they come into contact with and those people in turn are passing that energy along to others, etc.  People are calm and relaxed when they feel they can confidently predict what is going to occur – what is about to happen.  When their prediction goes out there goes their certainty.  Once certainty is gone it doesn’t take much to then feel stressed. 

What is “stress” but too much environment pushing against the person than there is of the person to push back?  When there is enough of “I” (you) there to push back at whatever is pushing – no problem.  A big cut in income alone is usually enough to cause most to be on edge nonstop.  When a person feels out of control of a situation the very best thing they can do is to deal exclusively in certainties.  What do you know is true?  What is for sure?  Concentrate on those things.  Look around and find other things and ideas that you are certain are true.  When you see something you are not certain of – recognize that fact.  Don’t pretend to know things you don’t know – if you aren’t certain (based on direct observation) know that you don’t know it.  That not knowing is – in itself – a form of certainty.

When you are not feeling “up” recognize that fact.  There are things you experience in your life that bring you up.  Take a walk, call a friend, eat something you like, buy some new shoes, whatever gives you a “lift”. What are those activities for you?  Make a list (lists?) of them.  Really.  Write down fun stuff you like doing.  Things that are simply fun and make you happy.  If possible, make it a point to do some of those things every day.  You want something that will help you have a better business?  Get in a good mood and then make your business decisions.

The Realtor Success Series Page is finally UP!

Sunday, May 11th, 2008

This is something I have wanted to have for a couple of years.  Finally it is something that is "done".  Done is a Success Series - smaller relative word, as I will continue to add news posts to that page.  But at long last, all of the relevant posts and relevant audio and video (relevant to getting and getting rid of listings) is all accessible on ONE page.

It took me several hours of pecking around to find them all (as I knew it would) but now anybody landing here can have full access to that material.  I won’t be surprised if I wind up sending more traffic to Bloodhound having left than I did while I was an active contributor there.

This is my first "official" post on this blog.  Welcome!